Farm Profitability Seen Down For Third Straight Year

Net cash farm income for 2016 was forecast at $90.1 billion, down 14.6% from the 2015 estimate and the third straight year of declines, said the USDA’s Economic Research Service Thursday.

In highlights from the November Farm Income Forecast, 2016 net farm income, a more comprehensive measure of profitability, was forecast to be $66.9 billion, down 17.2%.  If realized, 2016 net farm income would be the lowest since 2009 in both real and nominal terms, the report said.

 

ANIMAL RECEIPTS CITED

 

Cash farm receipts were forecast to fall $23.4 billion, or 6.2%, in 2016 because of a $23.4-billion, or 12.3%, drop in animal/animal product receipts the ERS said, while crop receipts were expected to be essentially unchanged from 2015.

Nearly all major animal specialties, including dairy, meat animals along with poultry and eggs, were expected to have lower receipts, including an $11.6-billion, or 14.8%, drop in cattle and calf receipts.

A marginal expected gain in crop cash receipts was driven largely by a $5.3-billion increase in oil crop receipts, primarily soybeans, while feed crops, mainly corn, and vegetables/melons were down $2.2 billion, or 3.8%, and $1.4 billion, or 6.9%, respectively.

 

SOME GAINS EXPECTED

 

While overall cash receipts were expected to decline, receipts for several crop commodities were forecast to increase by at least 10% from 2015 estimates, including cotton, up $0.9 billion, or 17.5%, the ERS said.

Likewise, while animal and animal product receipts were forecast to be down in 2016, turkey could be up $0.6 billion, or 10.6%, and miscellaneous livestock might gain $0.2 billion, or 2.9%, as receipts of both grew, the report said.

Direct government farm program payments were projected to rise $2.1 billion, or 19.1%, to $12.9 billion in 2016.

After sharp declines in 2015, average net cash farm income for most farms specializing in crop production was expected to improve.  Net cash farm income was forecast up for those specializing in mixed grains (up 10.4%), corn (up 15.1%) and soybeans and peanuts (up 11.8%).

 

EXPENSES DOWN

 

For the second straight year, production expenses were down, the ERS said.  They were seen down $9.2 billion, or 2.6%, from 2015, led by declines in farm-origin inputs (feed, livestock/poultry and seed) as well as fuel and oils.

Farm asset values were expected to decline by 2.1% in 2016, and farm debt was forecast to increase by 5.2%.  Farm equity, the net measure of assets and debt, was seen declining $79.9 billion, or 3.1%, in 2016, reflecting a 0.5% drop in real estate as well as declines in animal/animal product inventories, financial assets and machinery/vehicles.

The rise in farm debt was driven by higher real estate debt, up 8.6%.

 

CASH CATTLE MARKETS QUIET

 

After selling in the Superior auction Wednesday at an average of $112.48 per cwt, in a range of $112.75 to $114.25 in the south and at $110 to $113.25 in the north, cash action got underway at $113.25 to $115.50 on a live basis.  No dressed-basis trades were reported, although bids were seen at $175.

Last week cattle were at $109 to $113 per cwt, mostly $112.  Dressed-basis prices last week were steady to up $2 at $170.

The USDA’s choice cutout Thursday was $0.56 per cwt higher at $190.51, while select was up $0.16 at $172.77.  The choice/select spread widened to $17.58 from $17.18 with 95 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Wednesday was $130.51 per cwt, up $1.33.  This compares with Thursday’s Jan settlement at $127.77, down $0.65.